In the Magazine

Taking the Pain Out of Tax Season

For an easier time, here are five things your CPA wants you to know—and two they may not tell you.

With so many moving parts to a dance studio, tax preparation can seem overwhelming. Although you likely meet with your financial advisor quarterly, make estimated tax payments and have been planning for the next fiscal year, tax deadlines can still creep up on you. Now that they’re just around the corner, here are some steps you can take before you meet with your CPA, simplifying their job so you can save time and money. Even if it means hiring a little extra bookkeeping help, it will be worth it.

1. Finish your year-end bookkeeping. “You’re legally required to have books and ledgers, a summary of business transactions,” says Jessica Scheitler of Financial Groove, a financial consulting and bookkeeping firm for the arts, based in Las Vegas, Nevada. “A bank statement and pile of receipts aren’t enough.” Bring a trial balance, profit-and-loss statement, balance sheet, details about any purchased assets and a copy of your general ledger, preferably in a digital form compatible with your accountant’s software.

Reconcile all bank accounts by checking that your bank statements match your general ledger. Account for all income, loans in or out and all purchases, and record and categorize your receipts. Cory Ouellette, CPA with accounting firm Elliott Davis in Greenville, South Carolina, recommends doing this every month so you’re not scrambling at the last minute, “but at least do it before you visit your accountant,” he says. “It takes more time—and will cost more—to prepare your return if the accountant is also doing bookkeeping.”

Don’t forget: Keep business cards, date books and any marketing materials handy, especially if your books show consistent losses. “As artists, we’re battling the ‘hobby loss’ rules,” says Scheitler, a former dancer and choreographer. Though some losses may generally increase your refund, the IRS could deem your business a hobby if you’re not generating a profit three out of five years. If that happens, any losses you’ve declared—since day one—will be disallowed, and you’ll owe taxes on an adjusted amount, plus interest and penalties. “If you’re audited, you will need to prove that you’re trying to increase business. Save everything,” she says.

Going forward: Track income from cash, check and credit cards, especially if you received a form 1099-K this year from your credit card company. “On your return, you declare the amount of income specifically from credit cards or PayPal,” says Scheitler. The IRS compares that figure with the information from credit card companies. “If they don’t match, you’ll hear from the IRS. So set up your studio software to separate income that comes in via credit cards.”

2. Know the deductions you’re entitled to. Purchases made to operate your business are deductions. This includes dance shoes, website expenses, music, union dues and much more—check with your accountant.

Don’t forget about mileage. If you travel to competitions or from one of your studio locations to another, track the mileage and dates. “You don’t get a deduction for commuting [from your house to the studio],” says Ouellette. “But once you’re on the job and travel, you can even deduct looking for a new studio location.” And remember: “Gas receipts are useless without mileage logs,” says Scheitler.

Going forward: Make tracking mileage easy with apps like Expensify and Track My Mileage. And get into the habit of organizing all receipts right away. “It’s better for me to say we can’t use a receipt, rather than miss something we can’t bring back,” she says.

3. File your 1099s and W-2s. The deadline to send all employees and contractors form W-2 or 1099 was January 31, but make sure you file the forms with the IRS before February 28 to avoid late penalties.

Don’t forget: You must file 1099s for independent contractors if you paid them  more than $600. “People often neglect reporting 1099s, especially for family members or friends,” says Ouellette. “Get in touch with contractors if you don’t have their current addresses and social security numbers or EINs.”

Going forward: Check with your financial advisor to make sure your independent contractors aren’t actually employees. There’s a hefty penalty if you’re filing 1099s incorrectly. Lilia Wood, one of Scheitler’s clients, was hesitant to file W-2s for her two original teachers when she opened Ballroom in Boston studio in 2010. “I was reluctant to spend money I didn’t have,” she says. “But I learned that it’s not much more expensive because there are other write-offs that I would be missing.”

4. Don’t be surprised if you owe money. It’s easy to forget sometimes that you can only get money back that you’ve paid in. “If you’re not on a payroll and haven’t made estimated tax payments, you may end up owing money,” says Scheitler.

• Don’t forget: Make estimated payments throughout the year. A good rule of thumb is to set aside roughly 30–35 percent of earnings to cover federal, state and payroll taxes, says Ouellette.

Going forward: Meet with an accountant regularly. “Most decisions have to be made by December 31. If you come in April and this is the first time I’ve talked to you since last year, we can’t go back and make changes to the prior year,” he says.

5. Talk to us about your business. In 2012, Tina McMurray, of The Dance Studio, Inc., in Le Mars and Sheldon, Iowa, changed how she ordered costumes. “I used an ordering service, which affected my income,” she says. “Before, I’d collect deposits in December and the rest in January, but this year none of the money went through me. It was about a $16,000 difference in the books that I will have to discuss.”

Don’t forget: Don’t limit your discussion with your CPA to taxes, says Ouellette. “Conversations can lead to opportunities. For example, if we had known you were hiring, you would have qualified for an adjusted tax credit. Or if you’ve started covering employees’ health insurance, there’s a health tax credit.”

Going forward: Work with your accountant to create an appropriate plan and budget for your business. “Have a dream for your studio and discuss it,” says Wood. “Take advantage of their expertise so you can make those dreams a financial reality.” DT

What Your CPA May Not Tell You

“You’re too late.” “Even if you come to us on April 10, we’ll probably be able to get your return in on time,” says Cory Ouellette, CPA. “But if you’re that last-minute, we won’t have enough time to do tax planning that could save you money.” Work with someone year-round so you can ask any questions that you may have as they come up.

“I may not be right for you.” When Lilia Wood of Ballroom in Boston first opened her business, the accountant she used wasn’t a specialist in the arts. “She was a great accountant, but not for my business,” says Wood. “She missed many write-offs, and because I was inexperienced, I didn’t know the questions to ask.”

Tina McMurray, of The Dance Studio, Inc., in Iowa, left her original CPA “because she was too enabling for me. She’d say, ‘You’re doing fine,’ but I knew I wasn’t,” says McMurray. “I needed someone to hold me accountable for my spending. My new accountant has helped me get on track.”

Photo ©iStockphoto.com

Former students of Kelley gather around a cardboard cutout made in his honor at the recent tribute. Photo courtesy of Merritt

Every dancer has a teacher who makes an impression. The kind of impression that makes you want to become a dancer or a teacher in the first place. For Mara Merritt, owner of Merritt Dance Center in Schenectady, NY, and countless others, that teacher was Charles Kelley.

Known as "Chuck" to most, Kelley was born December 4, 1936. He was a master teacher in tap, jazz and acrobatics, who wrote syllabuses for national dance conventions like Dance Masters of America. Growing up in upstate New York, Merritt's parents, both dance teachers, took her into Manhattan every Friday to study with Kelley. First at the old Ed Sullivan Theater and the New York Center of Dance in Times Square, then years later at Broadway Dance Center.

Keep reading... Show less
Photo courtesy of DM archives

"It's hard not to get too hurt in this profession."

Ann Reinking got real earlier this month at New York City Dance Alliance Foundation's Bright Lights Shining Stars gala. She was being honored as a 2017 NYCDA Foundation Ambassador for the Arts, and her speech was so moving that we had to share the entire thing with you.

Keep reading... Show less
popular
Photo by Grant Halverson, courtesy of ADF

As a soloist with William Forsythe's Ballet Frankfurt and later as his assistant, Elizabeth Corbett got to experience firsthand the groundbreaking choreographer's influence on contemporary ballet. "I find it fascinating and never-ending," she says of his work. "It was a repertory that was constantly changing over time and still is." Now on faculty with the American Dance Festival, Corbett brings Forsythe's repertory and processes to the dancers in class every summer.

Keep reading... Show less
Dancer Health
During seated stretches, I encourage my students to sit straight on their sits bones and then fold forward at the hips—even if they don't go forward very far. One student tells me that if she sits as I instruct, she can't reach forward at all. Why?
Keep reading... Show less
Teachers & Role Models

In 2011, New York City–based choreographer Pedro Ruiz returned to Cuba after 21 years of dancing with Ballet Hispanico and more than 30 years being away. The experience was so moving that he created The Windows Project as a continuous cultural collaboration between American artists and Cuban dancers.

"I was so overwhelmed seeing all the dancers do Afro-Cuban dance with live music. It was the moment my soul reconnected to Cuba and to my roots," says Ruiz of his first trip back. "I started weeping." He saw that, while Cuban companies and schools have amazing knowledge and passion for dance, they needed access to train with teachers in a variety of techniques, and choreographers outside of Cuba. "Cuba is still struggling economically, so the dancers also don't have good ballet shoes or costumes, and The Windows Project was my way to begin to help," he says.

Keep reading... Show less
How-To
Thinkstock

Midway through every semester at Indiana University Bloomington, contemporary professor Stephanie Nugent notices that her students aren't quite as awake as they were the first week of classes. They're tired from midterm exams and bring less energy to the studio. Nugent, too, feels the lull. "Teaching in academia is an arc with many peaks and valleys," she says, noting that the repetition of exercises can get monotonous. "On days when it feels like we've been doing the same thing over and over, I give students an improvisational prompt, and it reignites all of our interests. It's something to investigate, rather than something to repeat."

Most teachers experience a moment of stagnation at some point. Maybe students aren't progressing as fast as you feel they should, or you feel uninspired by the daily routine. Factors outside the studio, like administrative work, can also deplete your energy reserves. During these low and slow times, consider the following ideas to find inspiration and give yourself—and your students—a boost.

Keep reading... Show less
Teachers & Role Models
Photo by Jennifer Zmuda, courtesy of BalletMet

Long before switching from ballet to Broadway became de rigueur, Edwaard Liang shocked everyone by leaving New York City Ballet to join the Broadway cast of the musical Fosse. Eleven years later, he defied expectations again by taking over as BalletMet's artistic director—without putting his robust freelance choreography career on hold. Liang, it seems, doesn't pay much heed to the conventional approach to a dance career.

In his four years with BalletMet, Liang has sought to challenge his dancers with diverse repertory that goes far beyond the typical confines of classical and contemporary ballet. This month, to celebrate BalletMet's 40th anniversary, the company teamed up with Ohio State University's dance department and the Wexner Center for the Arts to offer a smorgasbord of dance styles: from William Forsythe's singular brand of leggy-brainy dance to Ohad Naharin's exuberant Minus 16, performed alongside OSU dance students. Here, he talks to DT about the effect his choices have had on his career.

Keep reading... Show less

Sponsored

Videos

Sponsored

mailbox

Get DanceTeacher in your inbox

Win It!

Sponsored